Supreme Court rules in favor of flat purchaser, orders refund with interest and compensation for service deficiency

The Supreme Court upheld the National Commission's decision in a case involving deficiency of service by a builder. The Court ruled in favor of the flat purchaser, granting a refund of the deposited amount with interest and compensation for delays in possession. It found the clauses in the Apartment Buyer's Agreement to be unfair and unreasonable, and applied a specific interest rate for the refund based on relevant regulations. The builder was directed to comply with the refund order within three months.

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Issues Involved:
1. Deficiency of service by the builder.
2. Entitlement of the flat purchaser to refund and compensation.
3. Validity and fairness of the clauses in the Apartment Buyer’s Agreement.
4. Rate of interest applicable on the refund.

Detailed Analysis:

1. Deficiency of Service by the Builder:
The Supreme Court examined whether the builder's delay in obtaining the Occupancy Certificate and handing over possession constituted a deficiency of service. The builder was obligated to apply for the Occupancy Certificate within 39 months from the date of excavation, with a grace period of 180 days. The excavation commenced on 04.06.2012, making the final date for obtaining the certificate 04.03.2016. However, the builder failed to meet this deadline and only obtained the certificate on 23.07.2018. The Court cited *Lucknow Development Authority v. M.K. Gupta* and *Fortune Infrastructure & Anr. v. Trevor D’Lima & Ors.*, emphasizing that inordinate delays in handing over possession amount to a deficiency of service.

2. Entitlement of the Flat Purchaser to Refund and Compensation:
The flat purchaser filed a Consumer Complaint on 27.01.2017, seeking a refund of the deposited amount with interest and compensation for mental agony and litigation costs. The National Commission ruled in favor of the flat purchaser, holding that they could not be compelled to take possession after such a significant delay. The Supreme Court upheld this decision, stating that the purchaser was justified in seeking a refund due to the builder's failure to adhere to the stipulated timeline.

3. Validity and Fairness of the Clauses in the Apartment Buyer’s Agreement:
The Court scrutinized the clauses in the Agreement and found them to be one-sided, unfair, and unreasonable. For instance, Clause 6.4 (ii) allowed the builder to charge 18% interest on delayed payments by the purchaser, while the builder was only liable to pay 9% interest for delays in handing over possession. The Court referenced the Law Commission of India's 199th Report on unfair contract terms and *Central Inland Water Transport Corporation Limited and Ors. v. Brojo Nath Ganguly and Ors.*, concluding that the terms were oppressive and constituted an unfair trade practice under Section 2 (r) of the Consumer Protection Act, 1986.

4. Rate of Interest Applicable on the Refund:
The builder argued that the National Commission erred in awarding interest at 10.7% per annum, as the Agreement stipulated lower rates. However, the Court upheld the National Commission's decision, which applied Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017. This rule mandates that the promoter must compensate the allottee at the State Bank of India’s highest marginal cost of lending rate plus two percent. The Court found this rate just and equitable, especially considering the purchaser had to pay 10% interest on a loan taken to finance the flat purchase.

Conclusion:
The Supreme Court affirmed the National Commission's Final Judgment and Order dated 23.10.2018, dismissing the builder's appeal. The builder was directed to refund the amount deposited by the flat purchaser with interest at 10.7% per annum, excluding the period during which the stay order was in effect. The builder was granted three months to comply with the order.

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